A flexible approach to mitigation of supply risk through scenario modelling

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Scenario modelling

In the globalized world of intensive competition, supplying the right material at the right time of right quality at the right price is very important for the survival of a firm.  In order to ensure uninterrupted supply, it is necessary that the suppliers supply quality materials as per the given delivery schedule.   Delays in receipt of the material, or mismatch in quantity supplied, or material being of inferior quality or damaged, or the alteration in commercial terms delaying the supply from suppliers, are the common problems in Indian manufacturing sector which impact shop floor operations and production schedules, and affects the credibility and business potential of the Indian industry.

Many a times, these issues are mitigated by rigorous follow up with vendors, deputation of representatives at suppliers’ locations, rewarding or penalising  suppliers as a knee jerk reaction like holding the payments, scouting new vendors at the last moment or broad brushed approaches like maintaining inventory, multiple sourcing, etc.  These methods are time consuming and do not really help in smoothing the operations. 
This paper suggests scenario modelling as a proactive measure to mitigate such operational risks. Firms can think through the avoidable disruptions, and plan and work out the strategies to deal with them by blending multiple suitable approaches to remove or reduce the supply risks.  The authors further recommend analysis of the information about delays in supplies to understand the reasons for disruptions. Certain measures like improved coordination, disciplined approach, higher commitment levels, better employee engagement, etc. are also suggested to reduce supply risk disruptions and improve operations of Indian firms.

By Dr. Manisha Ketkar

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